Penn Octane Corporation
Chairman Services Agreement
This CHAIRMAN SERVICES AGREEMENT (this “ Agreement ”) is entered into on March , 2007, with an effective date of January 1, 2007 (the “ Effective Date ”), by and between Penn Octane Corporation, a Delaware corporation (the “ Company ”), and an individual residing in the State of (“ Chairman ”). The Company and Chairman are each a “ party ” and together are the “ parties ” to this Agreement.
WHEREAS , Chairman is to serve as chairman and as a member of the Board of Directors of the Company and the Company desires to compensate Chairman for his service (“Board Services”) as chairman and director and for his service (“Committee Services”) as a member of such committees of the Board of Directors of the Company as the board may determine from time to time.
NOW THEREFORE , in consideration of the mutual benefits to be derived and the representations and warranties, conditions and promises herein contained, and other good and valuable consideration, the sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Services to be Provided . The Company hereby engages Chairman to provide, and Chairman hereby agrees to provide to the Company, the Board Services and the Committee Services during the Term (as defined below).
2. Chairman Compensation .
a. As compensation for serving as chairman, director and board committee member, the Company shall pay to Chairman an annual fee of Twenty-Five Thousand Dollars (US $25,000.00) (the “Chairman Fee” ) and shall grant an annual option valued at approximately Six Thousand Two Hundred Fifty Dollars (US $6,250.00) (the “ Chairman Option ”), such option value determined in accordance with the Company’s usual accounting procedures, providing Chairman the right, but not the obligation, to buy shares of the Company’s common stock at an exercise price equal to not less than one hundred percent (100%) of the fair market value of such shares on the day of the grant, for a period of not more than five (5) years. Fair market value shall be determined in accordance with the stock plan under which the Chairman Option is granted and otherwise in accordance with applicable law and regulation. In lieu of calculating the number of shares subject to the Chairman Option based on a fixed dollar valuation, the Board of Directors may, in its sole discretion, grant the Chairman Option based solely on a fixed number of shares. As a condition to the exercise of the Chairman Option, the Board of Directors may, in its sole discretion, impose a condition of continued services for a period of not more than one (1) year following the date of grant.
b. As compensation for performance of additional Board Services and Committee Services, the Company shall pay to Chairman an additional fee of One Thousand Two Hundred Fifty Dollars (US $1,250.00) per Working Day (the “ Additional Fees ”) except as otherwise set forth herein. “ Working Day ” means a calendar day during which Chairman provides significant Board Services or Committee Services to the Company, including without limitation the attendance of meetings of the Board of Directors and any committees of the Board of Directors, and specifically including days spent solely or primarily in travel to or from locations at which Chairman provides Board Services or Committee Services. Chairman shall not receive any Additional Fees for preparing for and attending on an annual basis four (4) quarterly meetings of the Board of Directors, four (4) quarterly meetings of any committee of the Board of Directors of which Chairman is a member and one (1) annual meeting of stockholders, if any. Each payment of Additional Fees is subject to review and approval by the Board of Directors. No Additional Fees shall be paid to Chairman if, under any applicable law, regulation or rule, such payment would disqualify Chairman from membership on the Board of Directors or any board committee on which Chairman serves.
3. Payment of Fees .
a. The Chairman Fee shall be paid in equal quarterly installments beginning January 1, 2007. The Chairman Fee shall be pro-rated for any period of less than one full year of Board Services, including a pro-rated amount for the period November 1 – December 31, 2006.
b. The Chairman Option shall be granted on the date of the first quarterly meeting of the Board of Directors in each year beginning January 1, 2007, unless otherwise determined by the Board of Directors.
c. The Additional Fees shall be payable within thirty (30) days following receipt from Chairman of a written statement setting forth the specific dates during which Chairman provided the additional Board Services or Committee Services and reasonable detail regarding the nature of such services; provided, however, that the Company shall not be required to pay Additional Fees more frequently than once per calendar quarter, and that the Company shall be entitled to defer payment accordingly on any services set forth in a services statement.
4. Insurance . As additional consideration for Chairman agreement to serve as chairman and director of the Company, the Company agrees to provide, and maintain thereafter, a directors’ and officers’ insurance policy with an aggregate coverage limit of at least $5 million dollars with an insurance carrier having at least an A.M. Best rating of “A” or its equivalent.
5. Reimbursable Expenses . Chairman shall be entitled to reimbursement for reasonable expenses incurred by or on behalf of Chairman for the benefit of the Company and attributa